Don’t Talk to Me About Trillions; Tell Me About Your Taxes

I listened to president Obama’s speech today, and just so you know whose side I’m on, his speech made me furious. I would’ve liked this speech as his opening salvo in December when the Republicans with their new majority in the House said they would shut the government down if they didn’t get tax breaks for the rich. He didn’t do it then, but better late than never.

Obama spoke for almost 40 minutes, and like all political speeches, it was difficult to stay with. This speech, and indeed all the ballyhoo about the Republican budget plan outlined a week ago by Paul Ryan, the Wisconsin congressman, was larded with huge numbers, numbers too large to be grasped by people. Just what is a trillion dollars? You won’t live long enough to count that high, if you started now and counted night and day. We’re dealing with 14 trillion — the approximate size of the federal debt. Everyone agrees that’s too high, but the meaning gets lost. No one really says what a reasonable debt should be.

But very neatly, the speech, and the immediate response from John Boehner and Mitch McConnell, the two top Republicans framed the argument. You don’t need 40 minutes to do it.

While you pay more in taxes, who gets the $16,000 a year tax break and who gets the $63,000 a year tax break?

Obama said he was going to raise taxes on people earning $250,000 or more, and McConnell said succinctly, No way. I look at questions like this the same way as most of you — I want to know where I stand in all this. But people, especially politicians, aren’t direct. They practice throwing out trillion-dollar figures and they talk about grand principles.

But I urge you to think directly, to figure out where you stand to gain and lose in all this. To that end, I’m going to talk about some numbers that we all can grasp — human scale numbers, not trillions, or even billions.

The fact is that the average guy has gotten it in the neck in the last 10 years, and richer people have made out like bandits. Using the IRS reports on income tax collections, it’s easy to see the results of the Republican tax breaks on well-to-do families. The latest report covers 2008, and I compare that to the 1998 report, when Bill Clinton was office, and raised taxes on the wealthy, and then was nearly impeached by the Republicans in Congress.

Tax figures are tricky, since, in general people keep making more money, and therefore pay more taxes. The income of the average taxpayer went up to $53,000 a year in 2008, from $38,000 in 1998. Those are overall averages. It’s useful to take people in different situations, namely, the poor, the middle and well-off.

Let’s take care of the poor first. They don’t earn much and they don’t pay much in taxes. During these 10 years, their incomes have gone up. The federal minimum wage is up to $7.25 an hour, up from $5.15 an hour in the 90s, and their typical taxes have gone down a bit, to $517, from $588 in 1998. That’s all a good thing. You’re tempted to ask why we’re even bothering them at all.

The people in the middle are also making more money, and they’re paying more taxes, but their effective tax rate hasn’t changed much, remaining at around 9% of their total income. In 2008, people earning $50,000 to $75,000 a year, paid an average of $5,640 in taxes. People who earned the corresponding amount, those in the $30,000 to $40,000 range in 1998, paid $3,340 in taxes. I’ve raised the category to capture the people in the middle in each report.

I remember my own paycheck at times when taxes were cut in the past. The politicians and the media crowed about about what a boon we were getting, but when I looked, I saw around $3, $4 or $5 extra each week. A couple of beers. Big deal. Is that what voters are clamoring for?

What’s really interesting is the group that earns between $200,000 a year and $500,000 a year. In 2008, they paid $53,105 on average, but compare that to their tax bill in 1998, when they were paying $69,242 a year.

That’s a big drop in taxes, and that is a lot of money for each family, enough to do something with. And taken together, that’s where a good chunk of the federal debt came from.

The IRS numbers on those who are even richer, people whose income was $1 million or more, follow suit. In 1998, there were 171,707 of them, and 10 years later, there were 319,068. If this sounds like a large group, remember the IRS counted about 108 million taxpayers in 2008. This is also just annual income. It doesn’t count the value of stocks and bonds, real estate and other property.

The people in this class, together, earned almost $1 trillion ($934 billion to be exact) in 2008. These are the guys who run Wall Street, and almost created another great depression. These are the guys who run other big corporations that had to run to the hated government to stay afloat. These are the Kochs and other rich families promoting their right-wing agenda.

Each of these folks paid $798,000 in taxes in 2008. Compare that to the $861,690 each paid in 1998 — when their total earnings were less than a half a trillion.

Take Mitch McConnell’s advice. After Obama’s speech he said glaring out from the microphones that you should think about the taxes that are due on Monday. But think about whose taxes he’s talking about.

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Myself

I was a newspaperman for many years, last at the New York Times and before then at the Wall Street Journal. Something happened in the 1990s and I became fascinated with computers, went back to school and wound up with a PhD in computer science.